Saipem's Board of Directors has approved the Company's interim report for the quarter ended September 30, 2008.
Investments in the third quarter of 2008 amounted to €480 million (€314 million in the third quarter of 2007) mainly related to:
During the period, the contract for the construction of a Diving Support Vessel (as previously announced) was awarded to the Sekwang yard in Korea. Delivery of the vessel is expected for the fourth quarter of 2011. The total investment is estimated at €130 million.
Disposal of Non-Core Assets
With regard to the negotiations underway for the sale of the 20% stake in the Venezuelan company Fertinitro, said company has distributed dividends, Saipem’s share of which totalled €20.6 million. Saipem received €9.1 million in the second quarter and €11.5 million in October, which were recognized as a reduction in the carrying value of the investment, under "Net assets available for sale".
Net borrowings at September 30, 2008 amounted to €2,095 million, representing an increase of €401 million versus December 31, 2007, due to investments made during the first nine months of the year and the distribution of dividends, which were partly offset by cash flow from operations for the period, proceeds from the disposal of GTT and the improvement in working capital.
New Contracts and Backlog
During the third quarter of 2008, Saipem was awarded contracts amounting to €5,492 million (compared to €2,662 million in the third quarter of 2007).
The most significant orders awarded in the third quarter include:
New contracts awarded to the Saipem Group during the first nine months of 2008 amounted to €10,963 million (€7,443 million in the same period of 2007).
The backlog of the Saipem Group at September 30, 2008 stands at a record level of €19,041 million (€5,085 million in Offshore, €8,901 in Onshore, €5.055 in Drilling), of which €2,663 million are to be realised in the fourth quarter of 2008 and €7,363 million in 2009.
Management Expectations for 2008 and Medium-Term Scenario
The results achieved in the first nine months of the year and the positive development of the contracts currently under execution have prompted management to revise up its expectations for 2008. Adjusted net profit is now expected to increase by approximately 30% over the 2007 restated figure, while revenues are confirmed at approximately €10 billion and investments at approximately €1.9 billion.
At the end of September 2008, the backlog stood at €19.0 billion, versus €15.4 billion at the beginning of the year, while October saw the Saipem group awarded additional orders amounting to approximately €2.2 billion. As a result, the target announced at the start of the year of increasing the order backlog has already been comfortably met, leading to improved visibility.
With regard to medium-term expectations, it is still too early to be able to fully assess the impact on the Oil and Gas industry of the expected slowdown in the world economy.
However, given that Saipem's clients are virtually all large national and international oil companies who indicated having approved their investments using conservative oil price scenarios, the risk of projects being suspended or cancelled would appear to be remote.
In terms of future scenarios, our key Clients are of the opinion that oil prices will eventually stabilize at a level that will continue to make the development of large oil fields economically viable (i.e. fields in the Middle East, plus West Africa, the Caspian Sea area, Brazil and large frontier area fields in general.) The reasoning behind this conviction is that the Oil Industry has only just emerged from a period of underinvestment, and if oil prices were to create the conditions for a new period of underinvestment, the world economy would not have sufficient oil and gas availability, even considering the scenario of a significant economic slowdown.
Saipem possesses an industrial model that includes engineering and construction expertise and has a track record that makes it particularly qualified for tackling complex projects in frontier areas that, while representing a challenge, possess sufficiently robust economics as to be compatible with a scenario of relatively low oil prices.
Article 36 of Consob Regulation on Markets: conditions for the listing of shares of companies with control over companies established and regulated under the law of non-EU countries.
With regard to the recently published regulations setting out conditions for the listing of shares of companies with control over companies established and regulated under the law of non-EU countries that are deemed to be of material significance in relation to the consolidated financial statements:
Article 37 of Consob Regulation on Markets: conditions preventing the admission to trading on an Italian regulated market of the shares of subsidiaries subject to management and coordination by another company
The Board of Directors has ascertained that the conditions preventing the admission to trading on an Italian regulated market of the shares of subsidiaries subject to management and coordination by another company, set out in article 37 of the Consob Regulation on Markets, do not apply to the Company.
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